Asia is Cultivating a Taste for Wine

Asia is becoming the world’s largest and most dynamic market for wine. By 2018, countries in Asia are set to dominate global wine consumption. China is the main growth driver, with wine consumption set to grow by 60 per cent by 2018. What does the rise of the Asian wine drinker mean for the world of wine?

Asians embrace wine culture: Asia’s tea drinking culture has not historically translated into a preference for tannic red wines. But in spite of this, interest in wine has grown explosively among Asian consumers in the past two decades. Even for India as a traditionally whiskey drinking nation, a revival of wine production began in the late 1980’s and 1990’s.What opportunities does the wine market in Asia offer?
The wine sector is fast evolving to suit the palate of Asian wine lovers. China has emerged as one of the key markets set to change the global wine market dramatically. China is now the world’s fifth largest producer of grape wine in 2015. What factors are responsible for the stellar growth in Asia’s wine market?

Evolving taste for wine: Asia’s burgeoning economies and the development of a taste for Western lifestyles in China and elsewhere have driven the growing popularity of wine. In 2015, Asians became the biggest buyers of wine and are set to consume more than 4 billion bottles of wine in 2017.

Wine export opportunities: As Asia’s domestic wine production capabilities are still nascent, Asia’s interest in wine has translated into big opportunities for wine exporters from Europe, Australia, South America and elsewhere. This is especially since the traditional wine markets continue to decline or have no growth. For instance, China is the chosen destination for Australian wine exports – priced at USD7.50 per liter – with USD123 million worth of trade from a volume of 8 million liters as of June 2015.

Rise in women consumers: Growing awareness of drinking and the increasing financial independence of women is leading to a shift in drinking habits with more social acceptance of wine among female consumers. According to studies in 2010, 42 per cent of women in Japan drink wine more than two times in a week. Moreover, more than 70 per cent of Asian women in general drank wine for enjoyment.

Emerging wine markets in Asia: Asia is now emerging as a profitable business destination for investors in the wine market. As more consumers become curious about wine, a few emerging markets to watch out for include:

Japan: The Japanese wine market has come of age after a hiatus due to the Asian financial crisis in the late 1990’s. Wine has become newly popular via the media, especially with the help of celebrity sommeliers. In 2013, 3,324 thousand hectoliters of wine were consumed, which also makes Japan the sixth largest consumer of imported wines across the globe (as of 2015).

Challenges ahead: Asia is set to command 30 per cent of global spending power by 2030 – up from 11 per cent in 2013. What wine market challenges should investors consider?High tariffs: Import tariffs on foreign wines and spirits in Asian countries are quite high. This is a huge deterrent for importers. In India, import duties on foreign wines and spirits are at minimum 152 per cent. Moreover, the new Food Safety and Standards Authority of India (FSSAI) in 2014 introduced a new labelling requirement which makes it mandatory for all food and alcoholic beverages to list all ingredients on their label in English – which is not possible for international manufacturers.Currency rate fluctuations: Most countries now have flexible exchange rates, which exposes winemakers to foreign exchange risk in a more global marketplace. For instance, the recent downturn in the Australian wine industry was exacerbated by exchange rate movements over the years.

Future outlook: Although grape wine was historically consumed by Asia’s elite, the gravitation towards traditional European wine changed the scenario dramatically. Wine is now largely an aspirational, imported product in Asia. Asians continue to be allured by the Western wine dining experience. Moreover, social media provides an apt platform for customers to share information and experiences in wine tasting. Interestingly, there is a shift in the wine production realm. China is in second place in terms of vineyard area – 799,000 hectares – second only to Spain with 1.02 million hectares of vineyards. India and Bali in Indonesia are also emerging as wine producing regions. Producers in Asia are making slow but steady headway in growing wine quality and brand acceptance. A rising share of Asia’s future wine consumption may originate from Asia itself.